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Columns: Tax Talk
George Saenz, CPA   Expert: George Saenz, CPA
Tax Talk
Tax treatments on medical reimbursements may vary
Tax Talk

Reimbursed Medicare premiums

Dear Tax Talk,
My spouse and I are retired. Both are reimbursed for the monthly Medicare payments. My ex-employer deducts it from my taxable gross. My spouse's ex-employer says it is taxable. Who is correct? Thanks.
-- Larry

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Dear Larry,
You can generally exclude the value of accident or health benefits you provide to an employee from the employee's wages, including a retired employee.

This exclusion also applies to payments an employer makes directly or indirectly to an employee under an accident or health plan for employees -- that is, the payments or reimbursements of medical expenses. Medical expenses are those that are usually allowed for the medical expense deduction on Schedule A. Since the Medicare premium payments you pay are allowable medical expenses on Schedule A, their reimbursement can be tax-free.

Be aware that each employer may maintain different rules on reimbursable medical expenses. It may be that your wife's former employer discriminates in its reimbursements. If it doesn't treat all employees equally, the reimbursement should be income to her.

Bankrate.com's corrections policy -- Posted: June 05, 2007
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